10 Shocking Facts About Canada’s Healthcare System – Part 2

Part 2. Fraud Costs Canadian Taxpayers $14.5 Billion Annually

In his book “License To Steal: How Fraud bleeds America’s Health Care System”, Malcolm K. Sparrow, a professor with the Kennedy School of Government at Harvard University says:

“Health care fraud remains uncontrolled, and mostly invisible. For Americans, this problem represents one of the most massive and persistent fiscal control failures in their history.

“Many who work the system, or feed off it, like it so.

“For those who profit from it, health care fraud is not seen as a problem, but as an enormously lucrative enterprise, worth defending vigorously.”

In the U.S. numerous sources agree that fraud is at least 10% of all health expenditures, and the U.S. is a country that aggressively pursues health criminals to protect taxpayers – we don’t.

That is not to say that healthcare fraud is not an issue in the U.S. The U.S. National Healthcare Anti-Fraud Association estimates the loss to be in the order of $80 billion each year. That is a significant amount of money, but it is interesting to note that the U.S. population is almost nine-fold of Canada’s population but their loss to fraud is decidedly not nine times as high as ours. In Canada the per capita loss from fraud is about 60% higher than that in the U.S based on the U.S. estimates of 10% loss while we conservative Canadians put the average figure at 6%.

How America does it

At least a part of the reason for this discrepancy is that U.S. healthcare insurers, legislators and enforcement agencies take active steps to detect fraud. And the U.S. does not just pay lip service to the issue of healthcare fraud. When they find it, they go after it with a vengeance, and the perpetrators are very likely to find themselves behind bars!

Just last year, the U.S. Attorney General Jeff Sessions announced that “federal prosecutors have charged more than 400 people in taking part in medical fraud and opioid scam that totaled $1.3 billion in fraudulent billing”. The 412 people facing criminal charges include doctors, nurses, and pharmacists who, as the Attorney General so correctly noted “have chosen to violate their oaths and put greed ahead of their patients”.

In May of this year, a New Orleans physician who had scammed Medicare to the tune of $810,556 was sentenced to prison time followed by a term of home confinement AND had to pay back the $810,556 he’d stolen.

A New Jersey psychiatrist was convicted of fraudulently signing treatment plans with the intention of misleading Medicaid inspectors. She’s presently contemplating the prospect of five years in prison and a $250,000 fine at her sentencing to be conducted in August of this year.

This is just a small sampling of the vigorous pursuit and prosecution of healthcare fraudsters in the U.S.

Our inactivity

Do the Canadian governments exercise that same diligence in protecting the taxpayers? Emphatically, no, assertions to the contrary from the various Ministries of Health notwithstanding.

In Canada public healthcare money is issued on demand and without oversight. And it is this lackadaisical incompetence that has made the Canadian governments’ “efforts” at healthcare fraud control a laughingstock as reflected in Texas attorney James Moriarty’s comment that “OHIP doesn’t have sense to pour piss out of a boot”.

The Canadian Life and Health Insurance Association reported that “All Canadians pay for healthcare fraud. In North America alone, it is estimated that 2 to 10 per cent of all healthcare dollars are lost to fraud [an average of 6 per cent].”

That’s $14.5 billion every 12 months, $39 million a day or $1.6 million per hour. Every hour, around the clock.

And do the federal and provincial governments care? Not on your nelly. They don’t even keep track of the fraud that they do, by some miracle, manage to uncover. An article in a January 2013 issue of CMAJ (Canadian Medical Association Journal) reveals that there could be “Upwards of $20 billion per year being funneled inappropriately into someone’s pockets. But a precise breakdown of how much of that is respectively attributable to physicians, or to other health professionals, pharmacies or patients is entirely unknown, as there is no standardized reporting of cases of fraud in Canada or sharing of information between jurisdictions.”

So, what is the government’s documented focus with respect to safeguarding healthcare dollars?

Comments

In contributing to this post, kindly allow me to always clearly separate endogenous – inside the system- threats, from exogenous – outside the system – threats.

Now, to add to this post, Malcolm K. Sparrow\’s book, A \”License to Steal\”, he introduces a Model Fraud-Control Strategy:

1. Commitment to routine, systematic measurement (i.e. random fraud audits) 2. Resource allocation for controls based upon an assessment of the seriousness 3. Clear designation of responsibility for fraud control 4. Adoption of a problem-solving approach for fraud control 5. Deliberate focus on early detection of new types and patterns of fraud 6. Prepayment, fraud specific controls, and 7. Every claim faces some risk of review

Item 3 is referenced in Part 1 of this 10 part series: The standards identified in the wake of SOX, which includes a direct report to the Board of Directors in private plans and to the Deputy Minister in public plans.

This is not the case in Ontario.

In tackling health-care misuse, abuse and fraud (the latter decided at civil or criminal proceeding), Ontario health care plan administrators have yet to learn how to eat the misuse/abuse/fraud elephant a bite at a time, and to financial justify their effort through quantification of results. One of the tools for doing this is the problem-solving approach introduced in Chapter 9 of Sparrow\’s book.

Sparrow borrows this idea from problem-oriented policing – a response to the breakdown in the professional, incident-driven police service delivery model prevalent in the 1980s…when police departments were told to do more with less. One insight out of this breakdown included realization that the justice system may be a good incapacitation tool – putting people away for a time – but it has marginal, measurable effect as a stand-alone deterrent to crime. A different approach to public safety was required.

A problem-oriented approach is all about situational prevention. The model calls for constant scanning, analysis (included quantification), response and assessment of the results (measurement for changes in activity) in reducing recurring patterns (hot spots) of harmful activity. Projects should be on a situational or geographic scale to be completed in 6 – 9 months. To the trained reader will observe this is both robust and adaptive.

When probing endogenous – inside the system -threats, it is important to know that most people cheat a little bit (yes, including billing providers), and when they think others are cheating their cheating goes up. This should be controlled with behavioral science – nudging people towards the right choices. For example, the cool side…when people are reminded of their morality close to the time of the temptation…cheating goes down.

Billing providers are watching how their colleagues are treated. If perceived as draconian and not respectful, it will erode trust and cooperation among billing providers in controlling other misuses, abuses and fraud in the system. Ontario learned this the hard way, ending up with the Cory Commission – which the Commissioner said himself was not about fraud.

This is an entirely different challenge than identifying and tackling exogenous threats, or opportunity crimes, by fraud predators starting out with the sole purpose of gaming the system. An example is the corruption at Ornge Air Ambulance that, partially because of a lack of policy clarity and oversight, has rendered prosecution impossible. This is often the case as well with provider fraud due to the ambiguity built into the billing codes and a level of timidity in the MOHTLC in referring cases for civil and criminal proceedings, maybe from still reeling from the Cory Commission. This is hard ball stuff that ought out to be left to specialized units in the health care system working in tandem with police criminal intelligence and criminal investigators. The program area responsibilities should be help billing providers to keep the nasty boys from pounding on doors with warrants.

To this end, knowledgeable, committed fraud controls types are likely to die young in Canadian public health care systems. It is near to possible without the total re-commitment and support for independent action from the most senior positions in healthcare.

This differs from the United States, where the challenge is to shift mindsets towards working smarter than harder.

In contributing to this post, kindly allow me to always clearly separate endogenous – inside the system- threats, from exogenous – outside the system – threats.

Now, to add to this post, Malcolm K. Sparrow’s book, A “License to Steal”, he introduces a Model Fraud-Control Strategy:

1. Commitment to routine, systematic measurement (i.e. random fraud audits) 2. Resource allocation for controls based upon an assessment of the seriousness 3. Clear designation of responsibility for fraud control 4. Adoption of a problem-solving approach for fraud control 5. Deliberate focus on early detection of new types and patterns of fraud 6. Prepayment, fraud specific controls, and 7. Every claim faces some risk of review

Item 3 is referenced in Part 1 of this 10 part series: The standards identified in the wake of SOX, which includes a direct report to the Board of Directors in private plans and to the Deputy Minister in public plans.

This is not the case in Ontario.

In tackling health-care misuse, abuse and fraud (the latter decided at civil or criminal proceeding), Ontario health care plan administrators have yet to learn how to eat the misuse/abuse/fraud elephant a bite at a time, and to financial justify their effort through quantification of results. One of the tools for doing this is the problem-solving approach introduced in Chapter 9 of Sparrow’s book.

Sparrow borrows this idea from problem-oriented policing – a response to the breakdown in the professional, incident-driven police service delivery model prevalent in the 1980s…when police departments were told to do more with less. One insight out of this breakdown included realization that the justice system may be a good incapacitation tool – putting people away for a time – but it has marginal, measurable effect as a stand-alone deterrent to crime. A different approach to public safety was required.

A problem-oriented approach is all about situational prevention. The model calls for constant scanning, analysis (included quantification), response and assessment of the results (measurement for changes in activity) in reducing recurring patterns (hot spots) of harmful activity. Projects should be on a situational or geographic scale to be completed in 6 – 9 months. To the trained reader will observe this is both robust and adaptive.

When probing endogenous – inside the system -threats, it is important to know that most people cheat a little bit (yes, including billing providers), and when they think others are cheating their cheating goes up. This should be controlled with behavioral science – nudging people towards the right choices. For example, the cool side…when people are reminded of their morality close to the time of the temptation…cheating goes down.

Billing providers are watching how their colleagues are treated. If perceived as draconian and not respectful, it will erode trust and cooperation among billing providers in controlling other misuses, abuses and fraud in the system. Ontario learned this the hard way, ending up with the Cory Commission – which the Commissioner said himself was not about fraud.

This is an entirely different challenge than identifying and tackling exogenous threats, or opportunity crimes, by fraud predators starting out with the sole purpose of gaming the system. An example is the corruption at Ornge Air Ambulance that, partially because of a lack of policy clarity and oversight, has rendered prosecution impossible. This is often the case as well with provider fraud due to the ambiguity built into the billing codes and a level of timidity in the MOHTLC in referring cases for civil and criminal proceedings, maybe from still reeling from the Cory Commission. This is hard ball stuff that ought out to be left to specialized units in the health care system working in tandem with police criminal intelligence and criminal investigators. The program area responsibilities should be help billing providers to keep the nasty boys from pounding on doors with warrants.

To this end, knowledgeable, committed fraud controls types are likely to die young in Canadian public health care systems. It is near to possible without the total re-commitment and support for independent action from the most senior positions in healthcare.

This differs from the United States, where the challenge is to shift mindsets towards working smarter than harder.